Consumer Spending Variation Perplexes CPG Companies

CPG companies are experiencing a divide in their customer base. Higher-income consumers are spending freely while lower-income shoppers are tightening their spending, reports The Wall Street Journal.

“I think there’s certainly been much more bifurcation of the market, and it’s been creeping up over time. I wouldn’t say it’s been a sudden change,” said Bank of America analyst Anna Lizzul. Companies that are more exposed to low-income consumers “have mentioned the word bifurcation many times over the last 12 months,” she added, describing the divide between the two income levels.

Food companies leverage discounts and promotions to help their consumers. General Mills said in a recent quarterly earnings call that it would step up its coupon offerings, noting that the industry is back to pre-pandemic levels of promotions.

On the other hand, the report found that brands targeting better-off households continue to invest in their products to justify higher prices, a process called premiumization.

The premium tier of products “continues to grow very, very robustly,” Kimberly-Clark CEO Michael Hsu said on the company’s first-quarter earnings call. “That all said, clearly, I would say, middle- to lower-income households look like they are becoming more stretched.”

“I think the growth driver for us over the long term is by making products better, premiumizing, elevating our categories. But we want to serve the value-oriented consumer as well,” Hsu added. Full Story (Subscription Required)